“Market and industry structures are quite brittle, one small scratch and they disintegrate… how abruptly Professor Peter Drucker has captured today’s situation of the pharmaceutical industry.”

Infact all of us know that disruptions and changing habits of patients, doctors, distributors, pharmacists have made the market structure so different that we don’t know how brittle it is.

Similarly, if we look at industry structure SMEs, MSMEs, big pharmaceutical companies as well as MNCs and international companies are getting structured towards different directions and even the competition is emerging from different medical systems, diagnostics and new entrants in pharma industry along with technological disruptions.

It has been always said that there is no single blueprint for success; the evolving landscape continues to offer plenty of opportunities and what you need to perceive it. As already stated, the above market structure is dynamic and provides major opportunities for innovation. Each organisation has to be agile and utilise its entrepreneurial management skills with industry insights.

Eight disruptions and reforms

The disruptions in my opinion are behavioural reforms leading to changing habits that impact the growth. The two major disruptions that vibrated India are demonetisation and implementation of GST in 2017. Pharma companies are starting to recognise the impact of these two major disrupts, which includes downward pressure on pricing.

Following are some major disruptions, which have lot of bearing on the position of pharmaceuticals in 2018.

Demonetisation: Pharma executives are well aware of the disruptive potential and are experimenting with a wide range of digital initiatives. The Indian economy begins to get integrated with the global economy and enters the digital era; changes are likely to take place in the business environment often described by the term VUCA (volatile, uncertain, complex and ambiguous). Main areas where digitisation will drive value for pharma companies, is from an ability to deliver more personalised patient care, engage more fully with physicians and patients, use data to drive superior insight and decision making, and transform business processes to provide real-time responsiveness.

GST: An amalgamation of all the taxes into one uniform tax – GST, this will ease the way of doing business in the country, as well as minimise the cascading effects of manifold taxes. This has encouraged the transparency in the processes, improvised the operational efficiency by rationalising the supply chain, and improved overall compliance. It also changed the habit of individuals to work on consumption pattern.

De-branding: De-branding exercise has been happening in each country and it is a global phenomenon. It emerged into ‘Generics’. Now is the time to differentiate generics and science has to take a lead.
By promoting generic medicines drug consumption the government safeguards the health of its generic drug manufacturing industry—one of the largest suppliers of low-cost medicines in the world. The objective of Janaushadi Pariyojna is to make quality medicines available at affordable prices for all, particularly the poor and disadvantaged, so as to reduce out of pocket expenses in healthcare.

NITI Aayog decision on MCI: Niti Aayog has suggested a replacement of MCI with a National Medical Commission, which would encompass selected members through a transparent process. Niti Aayog’s draft legislation wants to change the education system by implementing entrance tests at start and exit phases of education, which will ensure the quality and quantity of doctors produced by the system.

Seismic shifts: Three seismic shifts have occurred. The first shift is in the balance of power across the healthcare value chain and second is downward pressure on pricing. The government and insurers are taking centre stage, pressuring pharma companies to reduce prices and demonstrate greater value from their therapies.
And thirdly, a swing from treatment to prevention and cure, attracts new entrants in market. This shift is driven by three developments like groundbreaking new therapies, advancement in technology, traditional medicine usage, alternate medicines acceptance and consumerisation of health through increased access to data by patients.

Advancement in technology: Product innovation and technology strategy is the essential link between development efforts and business strategy. Executive’s visibility to the pipeline of new product, technology, and platform projects enables strategic project selection, prioritisation, and spending decisions. An active portfolio company is active in several therapeutic areas and is equipped to acquire and divest parts of its portfolio in a ‘Plug & Play’ fashion.

Ground breaking new therapy: Ground breaking new therapies will lead to immersion of Niche specialists. Even though the speciality therapies will increase share, mass therapies will remain important. Mass therapy consists of two opportunity areas. Major opportunity is seen in acute indications, which incorporate therapeutical areas for respiratory and gastro-intestinal. This segment is increasingly being driven towards OTC because of patient awareness and propensity to self-medicate. The second opportunity lies with older therapies in chronic diseases like diabetes, hypertension.

Move towards genetics application: These applications would take patients to go closer to individualised and personalised medications.

Changing track: Treatment to prevention

Lifestyle diseases such as obesity, diabetes, cardiovascular problems, CNS disorders and other chronic diseases, etc. are on hike and are on target by the pharma industry. Well, this is due to the unhealthy habits, increasing stress; increase in adoption of western lifestyle chronic diseases will be focussed. But that doesn’t grab our opportunity to target acute diseases as due to poor hygiene and sanitation the acute diseases will also continue.

The industry previously was physician centered and now the trend is more towards patient centricity. They are keen to gain knowledge and literate themselves by healthy lifestyle tips. Various new technological applications are hovering over the market that tracks the health and helps in prevention, early diagnosis of diseases.

Also, today patients are becoming more aware of Pathy agnostic, thus alternative medical remedies business that focus on healing the internal root cause of disease are growing. An Ayurveda which includes treatment like Panchakarma (multi-day rejuvenation program) is highly personalised treatment, and focusses on preventive care rather than cure, and treat the body and mind holistically.

Ten emerging growth drivers

Patient centricity: The shift is observed from clinician-centric to patient-centric that will enable the IT to play a significant role. Significant transformation is observed in healthcare system, the role is extending from treatment to prevention and remote patient monitoring, maintaining health by means of fitness and adoption of healthier lifestyle.
Organisations need to design a new approach based on an understanding of patients’ experiences and how they make decisions. Most pharma marketers are familiar with the concept of conducting market research to create a ‘sales funnel’ as a guide for marketing programmes, where patients move in stages from product awareness to product purchase. Often, these use a linear or sequential logic to represent patient behaviour.
Combination of methods, tools, and techniques helps to encounter the principle of a patient-centric focus. The advantage of techniques will encourage patients to seek out information about their health on touch of finger, make appropriate decisions about their healthcare; they will proactively try to manage their health, and tend to experience better health outcomes.

Quality culture and compliance Quality control to quality assurance to quality delivery has been the progression of quality changes along with different quality management tools where different models are available. Knowing Indian characteristics and intelligence along with reverse engineering and reverse pharmacology expertise, I do not find any specific difficulty in maintaining high quality unless there are any managerial disruptions.
However, this being a major driver in providing relief to the patient as well as opening different horizons, we need to look at quality culture and compliance. It has been observed that cultural aspects of maintaining quality and compliance could be issue which is perhaps diluting quality.
It’s an internal issue and yet a very important growth driver and hence each company should focus on this driver.

Technology-driven growth: As technology is being utilised at R&D, product development level, you will find technology could be used to get into more niche therapies. Mass therapies can be provided at logistics as well as at target customer level and patient level with wide use of apps and technology-driven information, awareness and provide enough influence to educate patients to derive value from the new therapies.

Active portfolio: An active portfolio company is active in various therapeutic areas. As the number of blockbuster drugs protected by patents continues to decrease, the management of product lifecycle in pharma is going to be critical. The present Indian medical devices industry landscape is primarily 75 per cent import driven. Along with the challenges due to inadequate quality standards setting, time delays and other related hassles, new product development has become a hindrance making the domestic medical devices business challenging for the industry.

Rural markets: Besides urban markets where major consumption of pharma industry is observed and rural markets perhaps do not add that value but are capable of doing that. New disruption of increasing Janaushadi pariyojna and Patanjali outlets as well as promotion of generics, it’s important that through this new outlets as well as technology, rural market can be captured. There is also a possibility that tele diagnostics, telemedicine, along with e-commerce would perhaps accelerate the pace of capturing from rural markets.

Integrated healthcare: The Indian Government is currently in the throes to reform the healthcare system. After years of under-funding, most public health facilities provide only basic care. Moreover, three quarters of medical facilities are located in urban areas, leaving the majority of rural workers without access to hospitals or pharmacies. Many of the poor rely exclusively on alternative forms of treatment such as ayurvedic medicine, Unani and acupuncture. The initiative taken by the government lead to implementation of new policy to build more hospitals, boost local access to healthcare and improve the quality of medical training.

Rx to OTC: The market is experiencing consolidation and expansion through products or merging of new division for nutraceuticals and creating footprint in OTX & OTC markets. The Rs 3600-crore acquisition of Unichem’s domestic business by Torrent Pharma has brought the charm back into India pharma’s merger and acquisition.

Consolidation and expansion: Many times growth is stunted due to growth of few leverage brand and as a new product pipeline is drying up it becomes difficult to launch new products and make them successful in short time. Perhaps at that time buying over few brands or consolidating with other organisations with merger or acquisition becomes a good choice and driver. Similarly, it’s possible to expand through new therapy area and create another division to focus and grow. This expansion can be also way forward for growth.

International markets: International markets are always value creators for industry and now that ROW market (Rest of the World market) such as Asian countries, and other emerging ROW markets can provide an impetus for international market growth. Having an experience of the US, the UK, and other countries emerging markets would also provide good growth factors.

Mindset of management: It’s a mindset of senior management in every company to look at affordability, accessibility, acceptability, of change which are obvious in environment and align themselves in such a way that depending on the product mix, company creates mix in any of the three major factors essential for India.

How 2018 would look

After demonetisation and implementation of GST, consumers have changed their habits in several ways. The consumers are more conscious about their consumption and transactions are digitalised maintaining the transparency in the overall process. The result of this entire economy will be now driven by consumption and potential, the individual growth of an organisation will depend on the capability of organisation, demand generation, efficiency, product portfolio and pricing of the products. It is estimated that the growth will be affected and will account for 7.5 per cent to 8 per cent. Looking at demographics, in future our youngster will add substantial value to growth by 1-1.5 per cent. Hence, the industry may grow by 9.5 per cent to 10 per cent.

The young generations who are in right demographic dividend zone are adding value to the growth of industry. Adapting to the new technologies and digitisation processes is the new trend. The major disruptions or reforms in any country lead to change in habits. In case of demonetisation and GST, people have altered their way towards digitisation; GST had improved compliance and transparency in processes. Debranding has paved the way to prosperity of generics through Janaushadi Pariyojna and government is taking effort to provide affordable healthcare services. Also, we are best fit in providing tertiary care management and we encompass progress in medical tourism. The growth of the company will be dependent on the demand generation efficiency of the company and their product portfolio and pricing. Enabled IT services will empower R&D, hospitals, organisations, e-Health, to become patient centric.

What industry should choose?

If the industry is to improve its performance, provide services at affordable costs, serve the emerging markets more effectively and move along with the transition from producing medicines to managing outcomes – as demands of healthcare payers, providers and patients are increasing. At times it will have to collaborate with other organisations, both inside and outside the sector.

In addition, there is a clear economic rationale for greater collaboration. Several non-pharma companies have already entered the scenario. Vodafone has, for example, joined forces with Spanish telemedicine provider Medicronic Salud and device manufacturer Aerotel Medical Systems to offer a wireless home monitoring service. As the healthcare landscape changes and scientific expertise becomes less important than the ability to manage networks, the scope for competition from new entrants will increase.

Express Pharma, first published as Express Pharma Pulse in 1994, is today India’s leading business fortnightly for the pharmaceutical industry. With the patronage of its readers, Express Pharma has grown to become the No.1 Business News Magazine for the pharmaceutical industry. The editorial contents include: news, views, analysis and interviews, under four main segments: Market (The business of pharmaceuticals), Management (Insight for managing pharma), Research (Expertise for drug development) and Pharma Life (HR issues with a pharma focus). Besides this, we bring out periodic specials like the quarterly Pharma Technology Review, Packaging Special and LABNEXT.